December 2011 | www.selectasset.com
Goal setting strategies for 2012

As we approach the end of the calendar year, the need to tie up loose ends is pressing.  Some of us like to clean house, others focus on mending personal relationships.  Just as essential, though, is reviewing and reorganizing our financial plans to figure out what worked in 2011, and what changes need to be implemented in our S.M.A.R.T. goals to ensure a successful 2012 and every year thereafter.  Obviously, here in Japan our community is comprised of many diverse backgrounds and nationalities however the following are pointers that can be of use to most of us…

In order to get a clear picture, first you must review the state of your finances and the path they have taken over the past year.  Specifically, begin by reviewing:

  • Your net worth

What is your current net worth and how does this figure differ from what was there in January?  Are you happy with your progress?  Have you managed to accumulate more wealth, was it easy or were you stretching yourself too thin?  How can you increase your net worth in 2012 and get closer to your future goals?

  • Your tax information

The end of the calendar year is a good time to start preparing your tax information for the end of the fiscal year.  How much did you pay in taxes so far?  Do you have the documents necessary to file for deductions or credits?  How much will you likely owe at tax time, and how will this affect your net asset value?

  • Your insurance policies

How much do you pay each month for health insurance?  How about life insurance?  Are you happy with your current coverage?  Has your family situation changed in such a way that less or more life insurance might be necessary?

  • Your liabilities

In order to better plan for next year, it is important to list what your liabilities were at the beginning of 2011 and where you stand now.  Have you managed to decrease your liabilities, or have they risen?  A detailed list of all of your liabilities, including your mortgage, car loans, personal loans and credit card debt, is essential.

After you have completed a review of your finances, there are some last minute financial planning strategies that may be useful should they apply to you.  Many countries may have similar legalities, so it’s important to know where you stand.

  • Make last minute charitable contributions

A tip specific to Americans, making donations in the form of cash, property or appreciated stock, allows you to maximize your itemized deductions at tax time.

  • Make an extra contribution toward achieving your long term goals

If you have already started preparing for future financial targets, making just one extra contribution a year will substantially increase the amount of growth over time, and decrease the amount of time needed to have the capital sum you hope to have.

  • Make business purchases for next year

If you’re a business owner, making deductible purchases that you know you will need to make next year will also help to maximize the current year’s deductions.

  • Review your capital gains and losses

Another American specific tip is to take note of capital gains that you’ve realized this year and see if you can offset them against losses from previous years.  If not, it’s a good time to sell underperforming securities.

Finally, it’s time to consider what adjustments you can make in 2012.  After reviewing your progress in 2011, have you discovered areas in which you can improve?  Is there anything that you overlooked, delayed or want to add to your financial strategy in the upcoming year?  What are your goals for 2012 and for the rest of your career?  In order to increase you chances for success, it’s important to make your goals S.M.A.R.T. This is a popular mnemonic commonly used as a guideline to set and achieve goals.

S.M.A.R.T. goals must be Specific, Measurable, Ambitious, Realistic and Time-bound.

  • Specific

Often when we are setting goals, both financial and otherwise, we tend to be too general.  Deciding that we want to take control of our finances, for example, is too broad.  Goals need to be specific to be successfully achieved.  Thinking of a goal and then breaking it down until it is quite specific will make the challenge much easier to tackle…. One step at a time.

  • Measurable

Now that you have decided to achieve a financial goal, your next step is to make it measurable.  Deciding that you will just spend less money each month is not specific enough to provide measurable results.  To make your goal measurable, you should decide up front exactly how much you are going to invest each month and where that money will be coming from

  • Ambitious

In addition to being specific and measurable, a financial goal should actually be ambitious. Take a moment to consider how you want your life to be and what you want out of it.  Don’t be afraid to dream. With proper planning you could ensure having your dream become a reality. Why shouldn’t you too enjoy an affluent lifestyle in your golden years with your choice of vacations, hobbies etc.? Why shouldn’t your children have the option of entering the very best Universities the world has to offer? Additionally, if your targets are set too low and an unforeseen event should befall you on the way, you may have much more to worry about…

  • Realistic

In addition to being specific, measurable and ambitious, a financial goal must also be realistic.  Get rich quick schemes with unreasonable expectations, for example, probably would not fit into this category.  It is imperative that allocating money toward your specific financial goal is something that you can likely achieve, albeit with some (or even much) effort.  To do this, you have to be sure that the amount of money that you plan to allocate toward your target is something that you can maintain throughout the year.  You also must consider any hurdles that may arise and how these would affect your ability to stay on track.  If you cannot do this, you might need to revise your goal in order to make it realistic…

  • Time-bound

Finally, to make sure that your financial goals are S.M.A.R.T. ones, they need to be timely.  Since we have been focusing on revising your annual financial plan, in this case you would aspire to attain milestones within the period of one calendar year.  Continual review of your progress is essential to achieving success in a timely manner.

Hopefully, by reviewing how you fared in the current year and, based on this, setting S.M.A.R.T. financial goals for 2012, you will be well on your way to future financial independence...

Please visit www.selectasset.com for seeing what practical solutions are available for addressing your financial goals and targets.